“The Iran war has led to sharply higher energy prices and transportation disruptions, diminishing growth prospects in oil-importing countries and boosting inflation worldwide,” the Bank of Canada said in a statement.

The bank reiterated that it would continue “looking through the war’s immediate impact on inflation,” affirming that it would not move to raise rates in response to temporary oil price shocks.

But it added that it “will not let higher energy prices become persistent inflation,” and said it was “ready to respond as needed.”

The bank said its inflation forecasts were “based on the assumption that oil prices will ease.”

The decision marks the fourth consecutive hold for Canada’s central bank, which has previously said it wants to stay on the sidelines for as long as possible while uncertainty hovers over the key forces shaping the economy.

Prior to the Middle East war, the main source of uncertainty was the future trading relationship with the US.

President Donald Trump’s sector-specific tariffs have hurt crucial parts of Canada’s economy, particularly the auto, steel and aluminum sectors.

But more than 8% of cross-border trade has remained tariff-free thanks to the existing North American free trade agreement.

Revision talks on that deal are set to intensify. Trump has said the agreement is “irrelevant” to the United States.

His top trade officials have made clear that Washington wants substantial changes to the agreement that Trump signed and praised during his first term.

Canadian Prime Minister Mark Carney has said the US will not dictate the terms of a new agreement.

CIBC said in a note that the central bank faces a “two-way risk” — an economy facing inflation pressure because of the war while also confronting “sluggish growth” that could soften further if trade with the US meets additional levies.